Tickers: LON:DGE | NYSE:DEO — Updated 1 December 2025
Where Diageo’s share price stands right now
Diageo plc, the spirits and beer giant behind Guinness, Johnnie Walker and Smirnoff, is ending 2025 in the stock market’s sin bin.
- In London, Diageo shares recently traded around 1,740p, up slightly in early trading on 1 December but still roughly a third below their 52‑week high near 2,620p. [1]
- In New York, the ADRs (DEO) closed at $91.60 on 28 November, versus a 52‑week range of $86.57–$132.34, leaving the stock about 31% below its recent high. [2]
Across multiple reports, Diageo’s share price is down roughly 27–35% in 2025, even after a brief relief rally when investors welcomed news of a new CEO. [3]
That slump has had two big side effects:
- Dividend yield has jumped: trailing and forward yields now sit around 4.5–5.5%, near the top of Diageo’s 10‑year range, according to several dividend trackers. [4]
- Valuation has compressed: most data providers now put Diageo on a forward P/E in the low‑teens, versus historical levels closer to 20–25x earnings, even though the trailing P/E is still around 21–22x. [5]
So you’ve got a bruised “quality” stock: cheaper than it’s been in years, but cheap for reasons that are very much alive.
What went wrong: 2025 results and a painful forecast cut
Fiscal 2025: weak growth, weaker profit
Diageo’s fiscal year to 30 June 2025 was technically in line with guidance, but it did little to fire anyone’s imagination:
- Reported net sales: about $20.25bn, down 0.1%, but up 1.7% organically once currency and disposals are stripped out. [6]
- Operating profit: fell sharply on a reported basis (around –28%), hit by exceptional charges and cost inflation, despite modest organic growth. [7]
Management pointed to solid performances from Don Julio tequila, Guinness and Crown Royal Blackberry, but admitted that broader portfolio momentum was disappointing. [8]
Q1 FY26 and the November profit warning
The real damage came on 6 November 2025, when Diageo released its fiscal 2026 Q1 trading statement and cut guidance. [9]
Key points:
- Q1 organic net sales were flat, even as volumes grew modestly and pricing turned negative. [10]
- Diageo now expects fiscal 2026 organic net sales to be flat to slightly lower, versus prior guidance of flat with upside skew. [11]
- Operating profit is still guided to grow only low‑ to mid‑single digits, down from earlier “mid single‑digit” ambitions. [12]
The culprits are familiar:
- United States: Diageo’s biggest profit engine saw sales fall as much as 4% in recent periods, hurt by a sharp slowdown in previously booming tequila brands such as Don Julio and softer consumer demand. [13]
- China & Asia-Pacific: a high‑single to low‑double‑digit sales drop, driven by weaker demand for baijiu and premium spirits. [14]
Reuters summed up investor reaction neatly: the downgrade pushed Diageo shares to levels last seen around 2015, compounding an already steep slide. [15]
Strategy response: cost cuts, “Accelerate”, and portfolio surgery
To avoid becoming the next case study in “premiumisation hangovers”, Diageo is trying to move fast on three fronts.
1. Deep cost-cutting and efficiency drive
Under its “Accelerate” programme, Diageo has:
- Targeted around $625m of cost savings over three years, up from earlier $500m ambitions. [16]
- Started simplifying the portfolio, trimming underperforming SKUs (individual product lines) and rationalising its supply chain. [17]
Given Diageo’s ~$22bn net debt load, the pressure to squeeze more cash out of the existing business is intense. [18]
2. Portfolio reshuffling: vodka out, tequila in
The company has already signalled where it thinks future demand lies:
- Diageo is swapping much of its stake in Cîroc vodka for a controlling interest in Lobos 1707, a tequila and mezcal brand backed by LeBron James — a notable pivot from a challenged vodka category toward still‑growing agave spirits. [19]
Analysts expect new CEO Dave Lewis (more on him in a second) to go further, with some FT coverage suggesting that underperforming brands such as Captain Morgan rum or The Singleton whisky could be candidates for disposal while Diageo concentrates on its strongest franchises. [20]
3. No, Guinness is not for sale
In January 2025 Diageo had to explicitly deny speculation that it might sell or spin off Guinness or its 34% stake in Moët Hennessy, after rumours of a possible $10bn price tag for the stout brand. [21]
The company called Guinness a core asset, and with good reason: the brand has delivered double‑digit growth every year since 2021, with exploding demand for the 0.0% alcohol version and strong appeal among younger drinkers. [22]
Leadership reset: “Drastic Dave” Lewis takes charge
On 10 November 2025, Diageo announced that Sir Dave Lewis, the former Tesco chief executive, will become CEO from 1 January 2026. [23]
Lewis is widely known as “Drastic Dave” for his brutal but effective turnaround of Tesco, where he cut costs, simplified the range and rebuilt trust with customers and suppliers. [24]
Markets liked the choice:
- Diageo’s London shares jumped about 5.2% on the day of the announcement — their biggest single‑day gain in more than three years — even though the stock remains near decade‑lows. [25]
Commentary from the FT and others suggests expectations are high:
- Lewis is expected to review Diageo’s 200‑plus brand portfolio, potentially selling weaker labels and questioning the capital tied up in holdings like the Moët Hennessy stake. [26]
- With $22bn+ of debt and declining alcohol consumption in many developed markets, he faces both structural headwinds and impatient shareholders. [27]
The upside: if Lewis reprises even part of his Tesco playbook — simplified ranges, sharper pricing, cleaner balance sheet — Diageo’s earnings power could look meaningfully stronger by the late 2020s. The downside: turnarounds are messy, and investors may demand visible progress quickly.
Regional flashpoints: US, China, India… and Guinness
United States: tequila hangover
The US has gone from Diageo’s growth engine to a headache:
- In recent updates, US net sales have fallen between 2–4%, as the post‑pandemic boom in high‑end spirits faded and consumers traded down. [28]
- Once‑surging tequila brands like Don Julio have slowed sharply, undermining one of Diageo’s key growth narratives. [29]
China and Asia-Pacific: baijiu blues
Diageo has flagged a double‑digit decline in China, driven largely by weak demand for baijiu and other premium spirits as the broader Chinese consumer backdrop remains fragile. [30]
Asia-Pacific sales overall have fallen by high‑single digits in recent quarters, offsetting better momentum in Europe, Latin America and parts of Africa. [31]
India: tax shock in Maharashtra
In late November, Reuters reported that Diageo (via its United Spirits subsidiary) and Pernod Ricard are part of an industry group suing India’s Maharashtra state over a sharp tax hike. [32]
Key details:
- Maharashtra introduced a new “Maharashtra Made Liquor” category with a lower 270% tax rate for some purely local firms.
- Competing brands, including Diageo’s mass‑market McDowell’s whisky, now face a 450% tax, up from 300%, on affordable premium products. [33]
- Industry groups say sales of affected brands have plunged 35–40% in recent weeks. [34]
Maharashtra accounts for about 7% of India’s premium spirits consumption, so the legal battle is not trivial for Diageo’s long‑term Indian growth story. [35]
Guinness: star performer with a labour wrinkle
Guinness remains Diageo’s poster child:
- The stout has delivered double‑digit volume and value growth since 2021, boosted by social‑media buzz and the success of Guinness 0.0. [36]
However, one short‑term risk is labour:
- Workers at Diageo’s Belfast brewery — the world’s largest producer of Guinness 0.0 — are set to strike for several days in early December over pay, raising the risk of supply disruptions ahead of the Christmas season. [37]
For now this is more of an operational nuisance than an investment thesis changer, but it underlines how tightly the Guinness growth story is tied to smooth production.
Dividends, cash flow and balance sheet
For income‑focused investors, Diageo’s deteriorating share price has had a silver lining.
A much fatter yield
Multiple data providers now show:
- Trailing dividend yield around 4.5–4.7% on both ADR and London shares. [38]
- Forward yield closer to 5.5%, based on the latest declared payments and current share price. [39]
In November, Diageo confirmed the sterling equivalent of its final dividend at 47.91p per ordinary share, following approval at the AGM. [40]
Importantly, dividend payout ratios remain elevated:
- One analysis pegs the payout ratio around 60–70% of earnings, and notes that today’s yield is near Diageo’s 10‑year high. [41]
That doesn’t scream “unsafe” yet, but it leaves less room for error if profits disappoint further.
Cash flow and leverage
- An independent valuation site estimates free cash flow yield at roughly 5.25%, close to the dividend yield — suggesting Diageo is paying out most of its free cash flow as dividends. [42]
- The company’s net debt is around $22bn, a legacy of past buybacks and acquisitions. [43]
With forward P/E in the low‑teens and a mid‑single‑digit cash yield, Diageo screens more like a bond‑like “value” stock than the premium growth name it used to be.
What the analysts and algorithms are saying
Wall Street and the City: cautious but not panicked
For the US‑listed ADRs (DEO):
- MarketBeat tracks 10 analysts with a consensus rating of “Hold”: 4 Buys, 3 Holds, 3 Sells.
- Their average 12‑month price target is $119, implying about 30% upside from $91.60, with a range of $109–$129. [44]
For the London listing (DGE):
- Fintel calculates an average 1‑year price target of 2,231p, around 29% above the current 1,735p, based on a range of roughly 1,611–2,835p. [45]
- A MarketBeat note highlighted Citigroup cutting its target from 2,750p to 2,480p, still a “Buy” and implying more than 35% upside from the then share price around 1,819p. [46]
Some retail‑oriented analysis goes even further: a widely shared piece on Fool.co.uk summarised broker data suggesting average upside around 27% and the most bullish forecasts pointing to potential gains of over 50% if Diageo executes on its turnaround. [47]
Quant and technical models: short‑term caution
- Algorithmic site StockInvest.us currently rates DGE as a “Hold/Accumulate”, warning that the share sits in a falling short‑term trend and projecting a possible 10% decline over the next three months with a 90% confidence band between ~1,460p and 1,646p. [48]
- TradingEconomics’ model (where accessible) points to Diageo’s London shares drifting towards 1,700p by quarter‑end and below 1,600p within a year, essentially assuming no major re‑rating. [49]
On the other hand, institutional flows show that some professional money is quietly averaging in: a recent MarketBeat update flagged Grantham Mayo Van Otterloo & Co. more than doubling its DEO stake, with several other funds adding exposure. [50]
The blended message: fundamental analysts mostly see undervalued quality with issues, while trading systems still see a downtrend that hasn’t clearly reversed.
Bull vs bear case: what’s priced into Diageo now?
The bull case in a nutshell
Supporters of Diageo stock today tend to point to:
- Blue‑chip brands: Guinness, Johnnie Walker, Don Julio, Tanqueray and Crown Royal are global franchises with serious pricing power over the cycle. [51]
- Geographic diversification: Diageo is present in nearly 180 countries, spreading regulatory and economic risk. [52]
- High starting yield: a 4.5–5.5% dividend yield from an investment‑grade consumer defensive name is rare, especially with a payout policy that has historically been progressive, not cyclical. [53]
- Valuation reset: forward P/E ratios in the low‑teens and free cash flow yields above 5% contrast sharply with Diageo’s long‑run premium multiples. [54]
- New CEO catalyst: if “Drastic Dave” can simplify the portfolio, trim debt and refocus marketing, earnings could grow without heroic top‑line assumptions. The positive share price reaction to his appointment shows investors are at least open to this story. [55]
The bear case in a nutshell
Sceptics would counter with:
- Structural headwinds: alcohol consumption per capita is flat or declining in many developed markets, especially among younger consumers, which may limit long‑term volume growth. [56]
- US and China vulnerability: the two markets that mattered most for Diageo’s pre‑2024 growth are now underperforming badly, and there is no quick fix for consumer malaise. [57]
- High leverage: with roughly $22bn of debt and a rising yield environment over the last few years, Diageo has less flexibility to fund aggressive M&A or buybacks. [58]
- Dividend risk if the downturn deepens: the payout ratio is already elevated, and while management is clearly committed to the dividend, prolonged earnings weakness or a deeper restructuring could force a rethink. [59]
- Execution risk: portfolio rationalisation can create value, but it can also destroy it if crown jewels are sold too cheaply or brand equity is damaged by over‑zealous cost-cutting.
So, is Diageo plc stock a buy at the start of December 2025?
From a purely factual standpoint, Diageo today looks like:
- A high‑quality consumer defensive with globally recognised brands and genuine pricing power.
- A business in the middle of a profit slowdown and strategic reset, particularly in the US and China.
- A stock that has de‑rated hard — with lower earnings multiples and a much higher yield than its own history — but where analysts still see roughly 25–30% upside on a one‑year view if things stabilise. [60]
Whether that makes DGE or DEO attractive depends on your risk tolerance:
- Long‑term, income‑oriented investors may see today’s price as a chance to lock in a historically high yield from a still‑dominant player — while betting that Dave Lewis can engineer a Tesco‑style clean‑up over several years.
- Short‑term traders and more cautious investors will note that the downtrend hasn’t decisively broken, some quantitative models still forecast lower prices in the next few months, and macro risks in key markets remain unresolved. [61]
Either way, Diageo has quietly shifted from a “sleep‑at‑night” premium staple to a live turnaround story with both upside and execution risk.
References
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